GBPUSD is trending higher above a rising trend line on the 4-hour chart. Price looks ready to test this support area where more buyers are likely waiting.
Applying the Fibonacci retracement tool shows that this lines up with the 61.8% Fibonacci retracement level around the 1.3940 mark. The pair is already testing support at the 38.2% Fib near the 1.4000 major psychological level, which might be enough to keep losses in check.
If any of the Fibs hold as support, GBPUSD could recover to the swing high at 1.4170 or higher. The 100 SMA lines up with the 61.8% Fib and rising trend line to add to its strength as support.
On the subject of moving averages, the 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support levels are likely to hold. Stochastic is already indicating oversold conditions or exhaustion among sellers, and turning higher would confirm that buyers are back in the game.
RSI has some room to head lower, though, so a deeper correction might take place before sellers decide to take a break. A move below the trend line support could still find buyers at the 200 SMA dynamic inflection point, which might be the line in the sand for a pullback.
GBPUSD could take cues from the US retail sales report due later in the day, as the economy is slated to show a slower increase in consumer spending for April. This is right in line with the slowdown in hiring for the month, although it’s worth noting that the latest NFP reading was much weaker than expected.
In other words, the retail sales report might be poised for a downside surprise, which could bring losses for the US currency. After all, this would suggest that the Fed is likely to keep rates low for much longer or that the government might opt to boost stimulus again.